Soaring Health Costs

Many switching insurance plans to cope with large rate hikes

December 27, 2009

Health insurance rate hikes for 2010 premiums have many local employers looking for a second opinion on their health plans.

According to a report by the National Small Business Association, the average small business owner pays $7,076 per employee for health insurance and 61 percent expect to see an increase of 10 percent or more.

Dr. Mark E. Will, a veterinarian and owner of Glove Cities Veterinary Hospital in Gloversville, said despite the increases, he has no plans to switch his coverage this year.

Andrew Castiglione wraps and bags a gift for a customer Tuesday at Castiglione Gem Jewelers on Main Street in Gloversville.

"I'm concerned about the increase every year," Will said. "We have to pay for it somehow and we've been absorbing it. But eventually, it could result in an increase of costs to clients."

Will and about half of his nine employees are on a group plan in which everyone gets the same coverage. He said the HMO plan through CDPHP has been good for his employees.

"We've had it for years and we keep comparing it to other plans and other coverage," Will said.

The other half of the veterinary hospital's employees are on their spouses' plans, he said.

The Fulton County Chamber of Commerce & Industry has offered health insurance plans to its more than 900 members for 25 years. About 400 county businesses take advantage of the options from insurance carriers MVP Health Care, BlueCross-BlueShield of Northeastern New York and CDPHP offered through the chamber.

Rates this year increased from about 16 percent to 27 percent, chamber President Wally Hart said.

Though rates have been steadily rising over the last decade, Hart said, 2010's rate hikes are the steepest he has ever seen.

Small businesses can benefit from purchasing insurance through a membership organization, like the chamber, Hart said, because by doing so, they can get a group rate, which is cheaper than insuring a few employees themselves. Though many members are switching their types of plans, he said the chamber doesn't officially recommend any type of plan.

"They all went up across the board," Hart said. "It's not like we're saying jump from A to B."

About 50 percent of chamber members switched to high-deductible consumer-directed health-care plans that offer a health savings account this year, he said.

Dr. Rinaldo Esposito, a chiropractor in Gloversville who owns his own practice, employs one full-time and two part-time employees. He said all of his employees have health insurance plans through their spouses, but he uses a chamber plan for his own family of four.

Esposito has been with a health maintenance organization plan for 10 years through MVP Health Care. This year, he switched to an exclusive provider organization plan, still through MVP, with a $5,000 deductible.

Esposito said the high deductible isn't as risky as it may seem because, if he stuck with his current HMO plan for next year, he would pay up to $14,010 for his annual premium. With the EPO plan, the total premium plus the $5,000 deductible would be $12,390.

"Even if we shell out the whole thing, we're ahead of the game," Esposito said.

He also said his HMO plan carried high copays.

"If you have a lot of reasons to go the doctor, things add up," Esposito said.

Esposito said the rate hike didn't surprise him since his premium had been going up every year. Last year, he paid $11,745 for his HMO plan.

The EPO plan also carries a health-savings account, which appealed to Esposito.

"It's like an IRA and you can use that money for medical expenses," he said.

MVP spokesman Gary Hughes said many of the company's members have switched to EPO or preferred provider organization plans in the last few years.

"There is a movement among employers toward offering newer PPO and in some instances consumer-directed products," Hughes said.

Hughes said he understands how some individuals will benefit from switching to an EPO plan, since many of them are connected to a health savings account the employer offers, he said.

"That would typically meet some or all of the deductible on that policy," he said. "It lets the individual make some decisions in terms of cost and quality surrounding their care."

Hughes said increased costs of health care, more people in hospitals in 2009 and state taxes all have escalated premium costs in the area and across the state.

Louis Castiglione Jr., owner of Castiglione Gem Jeweler in Gloversville, said the rates are troubling, but none of his five full-time employees have switched or dropped plans, and not all of them are insured through Castiglione.

"When health insurance costs go up, it means employers have to look very carefully at financials and decide whether or not they can afford health plans," Castiglione said.

He said he is not looking at dropping his health plan he has through the chamber, but "the bottom line is that if health insurance goes up, income has to go up," he said. "Something has to compromise."

Ron Klug, a spokesman for the state Insurance Department ,said that he couldn't estimate how much health premiums for 2010 will go up across the state because it varies so much from plan to plan, but he did say that prior approval plays into the cost.

In New York state, insurance carriers do not have to request approval for rate increases, he said.

"There's no regulation," Klug said. "One problem is that once people get enormous rate increases, people drop out because they can't afford it."